The Securities and Exchange Board of India (“SEBI”) vide circular dated 22 May 2019 has announced the framework for the process of accreditation of investors for the purpose of the Innovators Growth Platform (“Framework”).
The circular defines Accredited Investors (“AIs”), for the specific purpose of Innovators Growth Platform (“IGP”), as investors whose holding in the issuer company is eligible for the computation of at least 25% of the pre-issue capital in accordance with the SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”).
As per the Framework, the following shall be eligible to be considered as AIs:
- any individual with a total gross income of Rs. 50 lakhs annually and who has a minimum liquid net worth of Rs. 5 crores;
- or any body corporate with a net worth of Rs. 25 crores.
According to the Framework, an investor having a Demat account with a Depository has to make an application to the Stock Exchanges/Depositories in the manner prescribed by the latter for recognition as an AI. The Stock Exchanges and Depositories are allowed to use the service of Brokers and Depository participants respectively and the former shall be responsible for verification and maintenance of AI data. The documentation required for accreditation is provided in the form of an Annexure to the Circular.
Once an AI is accredited, the accreditation shall be valid for a period of three (3) years from the date of issue of accreditation. However, if the AI becomes ineligible before the expiry of three years due to change in the financial status of the AI, s/he/it would be under an obligation to inform the Stock Exchange/Depository of such ineligibility.
When a Company applies for listing on IGP, the merchant bankers have to ensure due diligence with regard to the eligibility of AIs and that their holding in the Company desirous of listing on the IGP, is in accordance with Regulation 283(1) of ICDR Regulations.
Through the Circular, SEBI has directed Exchanges/Depositories to implement the procedure within forty-five (45) days from date of circular; to disseminate the provisions of the circular on their website and to communicate the status of the implementation of the circular to SEBI. In view of the framework, the Exchanges/Depositories will have to amend their bye-laws, rules and regulations.